The Pillar Blueprint A FRAMEWORK FOR CONSTRUCTION FINANCING. Solution Based Lender

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1 A FRAMEWORK FOR CONSTRUCTION FINANCING Solution Based Lender

2 What is the Pillar Blueprint? The primary goal of the Pillar Blueprint is to provide competitive, flexible mortgages for those planning on building or renovating their home. In addition to outlining the program and its benefits, this booklet also provides an overview of the process and important information on what to look out for as you begin planning your new project your new home. Benefits of the Pillar Blueprint Pillar provides a wide range of lending options not limited by traditional bank restrictions and guidelines. Get funding up front up to 60% of raw land value Build your own draw schedule Save on interest rates freedom to find the best mortgage upon project completion (no penalties) Better cash flow interest accrued is deducted from the draw Dedicated construction staff to ensure project and draws are progressing as planned Pillar advances all funds when the project is 98% complete; however, draws may be requested at any time throughout the process at a service fee of $150 plus inspection. pillarfinancial.ca

3 Speak with a mortgage professional If you require construction financing, it is extremely important to consult a mortgage professional prior to venturing out on your own to build a house. Understanding what is involved and the factors that come into play during the construction process need to be made clear so that the task is completed successfully. If you are building the home yourself, lenders will ask if you are an experienced builder or if you plan to contract out most of the work. The main concern of the lender is the individual s ability to complete the project both financially and tangibly. These are the main factors that play into whether or not you will be approved for financing. MORTGAGE PROFESSIONALS CAN HELP YOU: Initiate the process Arrange a construction mortgage Hire a general contractor Manage your home construction costs

4 PROFITING FROM NEW HOME CONSTRUCTION 1. Discuss your plans with a credible mortgage professional. Arrange financing with a lender who understands construction. Create your budget and timeline around a structured draw process 4. Build your house 5. Negotiate a new interest rate and term with your mortgage professional 6. Save thousands of dollars TYPES OF CONSTRUCTION (Eligible for the Pillar Blueprint) Residential (urban and rural) Renovations Planning Your Project Many lenders follow strict guidelines when it comes to the number of draws and times at which a borrower may draw from a loan. allows you to finance your construction project with ease. Whether you re looking to finish in four months, six months, one year or more, Pillar will work with you to build a budget and schedule that meets your project needs. DRAW PROCESS Draws typically happen every 0 to 45 days Prior to draws, an appraiser will perform an inspection Draws are based on project completion status (%) 4

5 Flexible Financing Pillar makes draws available at a range of construction stages and that can be requested at any time. STANDARD DRAW SCHEDULE AND PROGRESS REPORT EXAMPLE Will vary by appraiser Registration Project Completion (%) Draw 1 Excavation, footings, foundation Damp proofing, weeping tile, backfill Framing, sheathing, roofing completed 1 17 Draw Exterior doors and windows installed Roughed-in electrical Roughed-in plumbing and floor drains Roughed-in heating Insulation and vapour barrier Draw Exterior finish (siding/ stucco, trim) 1 Interior walls and ceiling finish 8 Finish carpentry (trim, cabinets placed) 11 Heating equipment complete 5 Electrical complete 1 Plumbing complete Basement floor placed Painting complete (interior and exterior) Interior doors Finish floors Walks and driveways Grading, site improvement Takeout Occupancy permit acquired 100 5

6 Construction Financing Fees Some banks may not charge fees during construction, but will lock the mortgage (at a five-year term) and charge higher than regularly advertised interest rates once the project is complete. In most cases, this results in higher costs for the borrower over the long run. With Pillar, you'll pay for an initial appraisal and inspection fees during the project, but your mortgage is fully open - meaning you can shop for the best mortgage rate with your mortgage broker once the project is complete! PHASES OF CONSTRUCTION Phase 1 Excavation Foundation Framing Windows and doors Phase Mechanical and electrical Interior walls and stairs Garage Exterior finish (house wrap) Phase Insulation and drywall Plumbing Fireplaces Exterior finish (siding) Phase 4 Lighting Cabinetry Flooring appliances Phase 5 Decks and patios Kitchen island and trim Landscaping Lien Holdbacks An appraiser must be sent out before each draw and a lien holdback will apply in the amount of 10% for each draw (as per the Construction Lien Act). Lien holdbacks are held to ensure trade staff get compensated. In Ontario, a 10% holdback is required for 45 days. These funds are held by the solicitor until completion of the project or the occupancy permit is acquired. 6

7 Breaking Ground If you re starting your first construction project, be sure to learn about all of the variables: Land With banks, the borrower must own the land free and clear. Private lenders can advance a certain percentage of the value of the land upon registration. Servicing Depending on the lender, land will need to be fully serviced. Certain elements must be included, such as site preparations and municipal services. Soft costs Municipal permits Fees for architects and engineers Fees for realtors and solicitors Fees for appraisals and inspections Initial building costs Cost overruns For self-build projects, the borrower should have additional resources or the ability to carry additional credit facility equal to at least 10% of the construction cost to allow for cost overruns. Initial building costs Some banks will require you to finance the initial stage of construction (usually 5% of construction) with your own money. Interest costs Banks require borrowers to make interest-only payments on all amounts advanced until takeout financing is arranged once construction is complete with another institution this restricts cash flow. Material costs Visit www. for Construction Cost Template PROJECT POINTERS You must own at least 40% of the land to initiate financing with the Pillar Blueprint Build a cash reserve 10% of your total budget is a good rule of thumb 7

8 Blueprint Guidelines Pillar commits up to 80% of the value of the completed home (land included) % underwriting fee Up to 1% of the balance in monthly accrued interest (open for repayment with no penalty) Draws based on percentage of completion BORROWERS ARE NOT REQUIRED TO MAKE MONTHLY PAYMENTS Pillar will accrue interest and deduct from the following draw Interest is charged on funds advanced to date Documents Required for Final Approval Complete application on Filogix by a licensed mortgage agent or broker Tarion Warranty Corporation insurance certificate if home is for resale Confirmation of costs to complete Building plans If self employed, proof that government remittances are up to date Appraisal, as complete, including land value (refer to list of approved appraisers) Takeout financing commitment or purchase and sale agreement Building permits Name of contractor Notice of assessment Built on a Strong Foundation With over 0 years of experience operating in eastern Ontario, Pillar is expanding into new communities across Ontario. Pillar is the mortgage underwriting company within W.A. Robinson Asset Management Ltd. We are an experienced and earnest operation doing our best to offer financing for contractors, builders and individuals building their own home. We d be pleased to meet with you. Roberto Blanco Regional Manager, South Western Ontario & GTA Cell: roberto@ 8

9 Solution Based Lender Visit www. for additional complementary resources including a Constructional Draw Calculator and Construction Budget Template Road #8, PO Box 08 Sharbot Lake ON K0H P0 Tel: Mortgage Brokerage Licence #10119 Mortgage Administrator Licence #1109